University of Texas Bulletin 

No. 1923: April 20, 1919 



A MODEL OIL AND GAS CONTRACT 


BY 


GEORGE C. BUTTE 
Professor of Law 



PUBLISHED BY 

THE UNIVERSITY OF TEXAS 
_ AUSTIN 








Publications of the University of Texas 

Publications Committee: 

F. W. Graff J. L. Henderson 
D. B. Casteel I. P. Hildebrand 
Frederic Duncalf E. J. Mathews 
R. H. Griffith C. E. Rowe 

The University publishes bulletins six times a month, so 
numbered that the first two digits of the number show the 
year of issue; the last two the position in the yearly series. 
(For example, No. 1701 is the first bulletin of the year 1917.) 
These comprise the official publications of the University, 
publications on humanistic and scientific subjects, bulletins 
prepared by the Department of Extension and by the Bureau 
of Municipal Research and Reference, and other bulletins 
of general educational interest. With the exception of 
special numbers, any bulletin will be sent to a citizen of 
Texas free on request. All communications about Univer¬ 
sity publications should be addressed to the Chairman of 
the Publications Committee, University of Texas, Austin. 


University of Texas Bulletin 

No. 1923: April 20, 1919 


A MODEL OIL AND GAS CONTRACT 


BY 


GEORGE C. BUTTE 

i 

Professor of Law 



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PUBLISHED BY THE UNIVERSITY SIX TIMES A MONTH, AND ENTERED AS 
SECOND-CLASS MATTER AT THE POSTOFFICE AT AUSTIN, TEXAS, 
UNDER THE ACT OF AUGUST 24, 1912 











The benefits of education and of 
useful knowledge, generally diffused 
through a community, are essential 
to the preservation of a free govern- 
• ment. 

Sam Houston 


Cultivated mind is the guardian 
genius of democracy. ... It is the 
only dictator that freemen acknowl¬ 
edge and the only security that free¬ 
men desire. 

Mirabeau B. Lamar 


n.' of fi. 

AUG 14 1919 


FOREWORD 


Thousands of farmers in Texas have given oil and gas 
“leases” on their farms during the past year, and many 
more are now negotiating such contracts. In almost every 
case, the contract is a printed or other form prepared by the 
oil companies, or by their attorneys, acting in the interest 
of the oil companies. Farmers, as a rule, are inexperienced 
in the oil business and unacquainted with the legal con¬ 
struction of the contracts they are asked to sign. 

The Law Department of the University of Texas is offer¬ 
ing courses on the subject of oil and gas law. Under the 
direction of the professor in charge of these courses, a 
special form of oil and gas contract has been studied out, 
having three ends always in view: (1) perfect legality; 

(2) clearness of meaning; (3) fairness to both landowner 

« 

and oil operator. 

Believing that the people of Texas—especially the Texas 
farmers—who are interested in the possibility of finding 
oil, will appreciate seeing a contract of the sort described, 
it is herewith submitted. 

The contract is designed for use in undeveloped or “wild¬ 
cat” territory, and may be easily modified to fit varying 
circumstances. The blanks covering essential matters 
should be carefully filled in, in conformity with the agree¬ 
ments arrived at. The contract contemplates that a sub¬ 
stantial cash payment will be made to the landowner at the 
time of signing. 



4 


University of Texas Bulletin 


OIL AND GAS CONTRACT 

This Agreement, made and entered into on this. 

.day of., 19. . . ., by and between 

.., whose postoffice 

address is., party 

of the first part, and.., 

whose postoffice address is.•., 

party of the second part, 

WITNESSETH: That the party of the first part, for and 

in consideration of the sum of. 

dollars, cash in hand paid, has granted, and does by these 
presents grant, to the party of the second part the right of 
entry upon and the sole and exclusive right to explore for, 
mine, and remove oil and gas, or either of them, including 
also the right to carry on all necessary incidental opera¬ 
tions, in, on, or under the following described land, to wit: 


upon the following conditions, towit: 

1. The party of the second part has the option, but is 
not bound, to drill a test-well on said land; but, if he has not 
commenced actual drilling of at least one test-well on said 

land on or before the.day of 

... 19. .. ., all his rights under 

this contract shall terminate without further proceedings, 
unless before said date he shall have tendered to the party 
of the first part or deposited to the credit of said party in 

the.Bank at 

.... or its successors, the 

sum of.dollars, 

herein referred to as optional payment, which shall suspend 
said termination for.months 



















A Model Oil and Gas Contract 


5 


after said date. The party of the second part is granted 
the option to hold this contract and all his rights thereunder 

alive for.more successive periods of 

.months each without commencing to drill 

a test-well, but no longer, by the tender or deposit in the 
manner aforesaid of optional payments each of which shall 
be fifty per cent larger in amount than the next preceding 
payment. Failure to tender or deposit any such optional 
payment in advance for any period shall terminate this con¬ 
tract without further proceedings. 

2. The completion of a test-well on said land, if a dry 
hole, shall have the effect of extending all the rights of the 
party of the second part under this contract without further 

payments or operations for.months after 

such completion, whereupon this contract shall terminate 
without further proceedings, unless the party of the second 
part, before the expiration of said last mentioned period, 
shall have commenced the actual drilling of a second test- 
well on said land or shall have tendered to the party of the 
first part or deposited to said party’s credit in the bank 

aforesaid the sum of. 

dollars, which optional payment shall suspend said termina¬ 
tion for.months; and the party of the second 

part is granted the option to hold this contract and all his 

rights thereunder alive thereafter for. . . .. 

more successive periods of. . ..months each 

without commencing to drill a second test-well, but no 
longer, by the tender or deposit in the manner aforesaid 
of optional payments each of which shall be fifty per cent 
larger in amount than the next preceding payment. Failure 
to tender or deposit any such optional payment in advance 
for any such period shall terminate this contract without 
further proceedings. If the second test-well also proves a 
dry hole, this contract shall continue in full force and effect 
without further payments or operations until the last date 
to which this contract could have been kept alive by the 
plan of optional payments described in this paragraph, 
whereupon it shall terminate without further proceedings, 









6 


University of Texas Bulletin 


unless before said date oil and gas, or either of them, shall 
have been discovered in paying quantities on said land. 

3. If any test-well produce oil and gas, or either of them, 
in paying quantities, this contract shall continue thereafter 
in full force and effect as long as oil and gas, or either of 
them, is mined in paying quantities and the conditions of 
this grant are substantially complied with. 

4. The one.part of all the oil mined and 

saved from said land, herein referred to as oil royalty, shall 
belong to the party of the first part, and the remainder to 
the party of the second part. The said oil royalty may be 
delivered to the party of the first part free of cost in tanks 
on said land or in the pipe line into which oil may be run 
from said land; and, in the case of oil not delivered in tanks 
or a pipe line, as aforesaid, the party of the second part may 
sell the oil, including the royalty share, and shall pay or 
cause to be paid to the party of the first part the one 

..part of the gross proceeds derived from such 

sale or sales, payment to be made by the fifteenth day of 
each calendar month for sales during the preceding month. 

If gas be produced in paying quantities, the party of the 
second part shall sell the same in its natural or converted 
state, and shall pay or cause to be paid to the party of the 

first part the one.part of the gross proceeds 

derived from such sale or sales, payment to be made by the 
fifteenth day of each calendar month for sales during the 
preceding month. 

5. The party of the second part shall keep an accurate 
record of all oil and gas mined on said land and of all sales 
of same, showing dates, purchasers, quantities, and price, 
a copy of which record shall be sent to the party of the first 
part by registered mail promptly after each quarter of the 
calendar year. 

6. The party of the second part shall have the right to 
use free of cost oil, gas, and water obtained by him on said 
land, so far as is necessary to the development and opera¬ 
tion of said premises. 

7. No well shall be drilled within 300 feet of any duell¬ 
ing on said land. The party of the second part shall use 





A Model Oil and Gas Contract 


7 


all practicable means to interfere as little as is reasonably 
possible with the use of said land for agricultural or grazing 
purposes. 

8. The party of the second part may at any time remove 
any or all of the property he may have brought upon said 
land. He shall securely plug any abandoned well or wells. 

9. The party of the second part shall protect said land 
by promptly drilling offset-wells. 

10. Upon failure of the party of the second part to com¬ 
ply substantially with any of the foregoing conditions by 
him to be observed or performed, the party of the first part 
may, by written notice reciting the failure complained of, 
delivered to the party of the second part or to his agent on 
the premises, declare this contract terminated without fur¬ 
ther proceedings, but the party of the second part shall have 
the right within sixty days after such termination to remove 
all the property he may have brought upon said land. 

In consideration of the premises, the party of the first 
part warrants that he is the? owner in fee simple of said 
land, and covenants that he will protect the party of the 
second part in the peaceable and quiet enjoyment of said 
premises for the uses and purposes herein specified. 

This contract shall extend to and be binding upon the 
parties hereto, their heirs and assigns, but no transfer or 
assignment by either party shall bind the other before notice 
thereof in writing has been sent to the other party by reg¬ 
istered mail. 

In Witness Whereof, we have hereunto set our hands on 
the day first mentioned hereinabove. 






8 


University of Texas Bulletin 


State of Texas } 

County of. f ss ‘ 

Before me, .. a notary public in 

and for. County, .. 


on this day personally appeared.. 

known to me to be the person whose name is subscribed to 
the foregoing instrument, and acknowledged to me that he 
executed the same for the purposes and consideration there¬ 
in expressed. 

Given under my hand and seal of office this. 

day of., 19. 


Notary Public. 


State of Texas 
County of .... 


ss. 


Before me, ., a notary public in 

and for. County, ., 

on this day personally appeared., 

wife of., known to me to be the person 


whose name is subscribed to the foregoing instrument, and 
having been examined by me privily and apart from her 
husband, and having the same fully explained to her, she, 

the said., acknowledged such instrument 

to be her act and deed, and declared that she had willingly 
signed the same for the purposes and consideration therein 
expressed and that she did not wish to retract it. 

Given under my hand and seal of office this. 

day of., 19. 


Notary Public. 





























